Thirty to fifty percent of all retail sales could be online within five years, say researchers
Online reaches 17% of retail sales, nears tipping point Thirty to fifty percent of all retail sales could be online within five years, say researchers. UK shoppers spent £26.5billion online in the first six months of 2008, up 38% on the £19.2billion recorded for the same period last year, according to the latest IMRG Capgemini e-Retail Sales Index. That means online sales are now accounting for 17p in every pound spent, equivalent to half of all supermarket sales.
The researchers are now predicting that between 30% and 50% of retail sales will be online in five years. “This is because, as online reaches 20% of all retail sales, retailers experience a tipping point which forces them to seriously re-think the future viability of their business model,” explained Mike Petevinos, head of consulting for retail at Capgemini UK. “We have seen this happen for books, music/DVDs and electricals and as the industry as a whole reaches this tipping point in 2008, more categories are sure to follow.” Sales growth did begin to slow in June, however, with the normal dip in growth experienced in the month “significantly more pronounced than 2007.” That said, Capgemini and IMRG expect rising fuel costs, falling disposable income and smarter consumer shopping habits to drive strong online sales growth throughout the rest of 2008. “Whilst online retail is not immune to the credit crunch, it is showing greater resilience than the high street,” Petevinos explained. “The online channel continues to grow its share of retail spend thanks to the traditional drivers of convenience and choice but these drivers appear to be magnified by the current economic environment.
Convenience has a sharper edge in a world of soaring fuel prices and the ability to research and make more informed choices in a time of heightened price sensitivity is a key advantage of the online channel.” The most pronounced sales increases during the first half of this year have come from both the top end and the bottom end of the market which, say the authors, shows that consumers are becoming smarter shoppers, buying everyday items at discount retailers whilst adding a touch of luxury with select items from high-end retail outlets. This is further backed up, they say, by recent research which found that UK internet visits since June 2007 to mid-market online retailers have fallen by 6%, while visits to lower-end retailers, such as Primark, have increased by 12% and visits to high-end retailers, including Harrods, increased by 14% over the last twelve months.
“Clothing and footwear sales were the biggest losers in physical stores in June, with sales either flat or lower than last year despite heavy and widespread discounting,” explained James Roper, IMRG’s chief executive. “Online, however, they were big winners; internet clothing sales were up 32%, while lingerie sales rose by 37% and footwear 38%.”
Online retailing is continuing to boom in the UK despite a gloomy economy outlook, according to new research. The consumer survey of 4,000 shoppers, conducted by retail analysts Verdict Research, indicted that the amount of money spent by consumers shopping online increased by 35% to £14.7bn last year.
The growth rate was the fastest in six years, and represented about 10 times that of the UK’s retail market as whole. The top answer for opting for the internet over the high street was ‘making better use of leisure time’. The growth in internet access and users making more regular and expensive purchases online meant the growth would continue, Verdict’s report suggested. It forecast that online retail sales would reach £44.9bn by 2012, about 13.8% of total spending. But while some of this was “cannibalisation” - people buying via their computers what they would previously have gone to shops for - physical shopping was far from doomed, the report said. “There is still a need and place for physical locations - the key is to ensure that synergies with online retailing are exploited to drive footfall to stores,” Verdict said. “While having an Internet presence is vital, giving the consumer choice by establishing strong links between the in-store and online offer is now essential.”
The development of faster broadband had made the process of shopping quicker and easier for many people, Verdict concluded, while many saw it as a way of getting cheaper prices. “The internet is widely perceived as a cheaper and easier way of finding lower prices and bargains in most sectors,” said Malcolm Pinkerton, Verdict’s senior retail analyst. “As the cost of broadband falls, consumers become accustomed to internet shopping and retailers continue to enhance their online propositions, the channel will find itself extremely well-placed to capitalise on the falling consumer confidence and lower levels of disposable income currently impacting the retail market.”
www.wdsinternet.com/ecommerce.aspx
The total online clothing and footwear market grew by 38% to £1.7 billion in 2007 up from £1.2bn in 2006, according to a report by Verdict Research.
A report entitled UK e-Retail 2008 surveyed 4,059 online shoppers and revealed that the online market accounted for 4.2% of all clothing and footwear spend in 2007.
The report said that online shopping was becoming an integral part of UK retail with total online retail spend worth £14.7bn in 2007, up 35% year on year, and a rate of growth almost 10 times higher than that experienced by the total UK retail market.
Last year’s growth was driven by a 5.9% increase in internet users – to 33.1 million - and a 24.7% increase in online shoppers – to 22.6m.
Online shoppers are also purchasing more regularly (an average of 16.9 times per year, an increase of 2.7 trips on 2006) and each spent an average of 7.8% more than 2006.
Verdict Research predicts that with internet access growing and users purchasing more frequently online, this strong growth is set to continue, with online retail sales set to reach £44.9bn by 2012.
Malcolm Pinkerton, senior retail analyst at Verdict Research, said: “The internet is widely perceived as a cheaper and easier way of finding lower prices and bargains in most sector. As the cost of broadband falls, consumers become accustomed to internet shopping and retailers continue to enhance online propositions, the channel will find itself extremely well-placed to capitalise on the falling consumer confidence and lower levels of disposable income currently impacting the retail market.”
Verdict’s consumer research also revealed that a long standing AB demographic bias to the online shopper base persists, but there has been a substantial rise in the number of C2s and DEs as a result of the falling cost of broadband. The number of C2 shoppers has increased by 35.5% to 4.2m and the number of DE online shoppers has increased by 38.9% to reach 2.5m. This is in contrast to the 23.2% rise in the number of AB shoppers and the 19.3% rise in C1 shoppers, where growth is beginning to slow due to the user base maturing.
The report also said that while having an internet presence was vital for retailers, giving the consumer choice by establishing strong links between the in-store and online offer was also now essential. Pinkerton said the key was to ensure that synergies with online retailing were exploited to drive footfall to stores.
The convenience of shopping online is the main reason for its continuing success and this was mentioned by more than half of the 4,059 adults surveyed for Verdict’s report.
Longer term, growth is set to be driven by the ageing population. As today’s younger shoppers get older and their income and spending power increases, the amount they spend online is likely to increase. The internet will be seen as a normal way to buy goods, as this generation replaces one that is more predisposed to make purchases from physical shops. However, this does not necessarily signal a death knell for physical stores.
Pinkerton said: “In many cases online and in-store sales channels will simply blur into one, becoming fully integrated. There is still a need for physical locations, but the number of stores required will vary according to sector.”
He added: “Having an internet presence is now vital and the combination of an in-store and online presence with strong links between the two is essential, giving the consumer choice by becoming multi channel is the key to success.”
www.wdsinternet.com/ecommerce.aspx
Could eCommerce boost your company’s annual revenues by an additional 5-10%?
It is very interesting and important to compare high-street retailers with mail order companies. In the UK more than 1 in 10 books are now purchased online, that is over 10% of the actual market share.
John Lewis’ online sales now exceed total sales of it’s largest Oxford Street department store and many specialist mail order companies have expanded online revenues to exceed 25% of total turnover.
Littlewoods has ramped up its target for the proportion of business it wants to do online from 50 to 70 per cent, having achieved its original goal three years ahead of schedule.
www.wdsinternet.com/ecommerce.aspx
User friendliness
It is vital for your shop to be welcoming and user-friendly. Just as in a ‘bricks and mortar’ establishment, you should make every effort to provide an online shop that is inviting and gives your visitors a pleasant experience.
Contact details
Make sure your contact information (including phone numbers, email address and postal address) are readily available. They should either be part of every page or reached by means of a prominent link on each page.
Don’t hide the door to your shop
Make sure your design shows clearly how to enter your shop, to avoid confusion visitors. The shop entrance should not be obscured with advertisements or too much information. Home pages that are too busy may prevent the customer from locating your shop and the goods or services on offer there.
Use easy navigation
To prevent your visitors from wandering aimlessly around your shop, make sure your navigation system easily allows them to find what they came for.
Let your visitors browse freely
Be careful not to hassle customers for personal information until they are ready to buy. This is the equivalent of a pushy sales assistant and could result in customers going elsewhere.
Layout
Make your shop layout and categories meaningful for customers. Items should be divided into appropriate categories, making it as easy as possible for people to find what they are looking for. Avoid ambiguity in the categories and if necessary use text descriptions to explain what is in a category.
Search facility
A search facility should always appear prominently on the web site. A quick and easy means of ‘finding what you are looking for’ is particularly important, given that browsing through a large online shop can be a difficult and slow process. Make sure that the search facility accepts appropriate terms, including multiple words. This will make the whole searching process work well for customers.
Accessibility
Make sure your online shop can be operated by and is accessible to all customers. ‘Accessibility’ means ‘making the content accessible’, so that everyone can navigate and read what is there, regardless of their location, experience, disability, or type of technology they use. As well as being required by law, good web site accessibility will bring you many more potential customers.
Keep your products list up to date
The shop items need to be kept up to date with correct information. There is no point in advertising items that you no longer stock or that are wrongly priced. Web site users will come back if they know the content is updated regularly. But if you disappoint a customer by not providing an advertised product, you will get ‘poor press’ as the customer relays their experience to others.
The shopping cart
The shopping cart should be both easy to use and to navigate. Shop items should have clear and informative labels to describe them and to show if they are in stock. The customer likes to see what they are buying, so you should include images of items to help identify them. This is particularly important for the more expensive purchases or fashion items. The ‘add to cart’ link should be positioned next to each item listed, with the ‘view cart’ link viewable at all times.
As the customer makes their order, each step of the shopping cart process needs to be explained, from adding an item to paying. Orders should be placed and processed with as few clicks as possible, and customers should have to provide as little information as possible. There should be provision for the customer to recover easily from any mistakes.
Payment options
Be as flexible as possible and allow your customers a variety of payment methods, including:
- credit card
- debit card
- payment processor (for example, WorldPay and PayPal)
- multi-currency
- cheque with order
User testing
Use a sample group of people of different ages, backgrounds and Internet experience to find and buy a product. Use their feedback to fine-tune how your online shop works.
Customer account management options
Registered web site users can log into an account management section with their email address and password to manage the following areas:
- ‘My profile’ – allows users to keep their contact and account information such as payment method and delivery address.
- Account history – where users can view all orders made through the web site, checking each order and its details in full at any time.
- Order tracking – once an order has been placed, users can log into their account management section and view the progress of their order (for example, has it been dispatched?).
Wish lists
Wish lists drawn up by the customer of items they desire can be used as the ideal shopping list for their friends and family choosing the perfect gift.
- The wedding gift list is a good example of the wish list. The bride and groom register with your wedding gift list service online, then browse through the online shop and add whichever items they want to their wedding gift list. Once they have completed the list, they will receive a URL (web site address), username and password to give to guests, who can then go online and log into that list. The guests can view which items have been bought and which are still available to buy.
Customer details and mailing lists
You can ask customers when they register with your online shop if they would like to be added to your email mailing list. Then you can divide this into two types of email mailing lists – HTML (the language of the Internet) and text only. You can use the mailing lists to inform customers of sales, special offers and other initiatives.
Value added experience
You should promote the value of online shopping at your web site. If you can offer benefits over high street shopping, customers may be tempted to buy online. Your promotion will depend on the kind of items you sell, but useful features could include product reviews.
